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Demand-Driven Inventory Optimization and Replenishment: Creating a More Efficient Supply Chain


Praise for Demand-Driven Inventory Optimization and Replenishment

"The timeliness for a conversation explaining the rationale for a demand-driven—versus exclusively supply-managed—organization could not be better. And, the manner in which Bob has taken the subject on, with his approachable and compelling anecdotes supported by rigorous analytical reasoning, is sure to open up a good deal of long-awaited and necessary debate. Manufacturers and retailers both will want this book on their desks as a fundamental ...

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Praise for Demand-Driven Inventory Optimization and Replenishment

"The timeliness for a conversation explaining the rationale for a demand-driven—versus exclusively supply-managed—organization could not be better. And, the manner in which Bob has taken the subject on, with his approachable and compelling anecdotes supported by rigorous analytical reasoning, is sure to open up a good deal of long-awaited and necessary debate. Manufacturers and retailers both will want this book on their desks as a fundamental resource for reconciling their differentiated points of view so that a true partnership might win the day for all."
—Michael Forhez, Principal, Consumer Markets, Capgemini Consulting

"Bob Davis has produced an interesting page turner, simplifying Kanban, JIT, VMI, and CPFR and shedding light on how inventory management needs to be demand-driven, optimized, and focused on replenishment. Davis uses many anecdotes and examples such as Mary's Candles to illustrate complex topics and explain critical phenomena such as long-tail phenomenon, bullwhip effect, and the cost of expediting. The author is masterful at elevating supply chain concepts from the dark underbelly of the organization to the operations and executive level. A must-read for all supply chain professionals and key executives."
—Peter B. B. Turney, PhD, President and Chief Executive Officer, CT Global Solutions, Inc.

"This thoroughly enjoyable book interlaces and compares academic theory with practical examples, exposing often ignored realities, and through this identifies many new opportunities to realize the benefits in this critical area of operations. With reductions in inventory stalling and rapidly increasing pressures on the value chain, this well-researched book makes a truly valuable contribution to demand-driven inventory thinking and practice, which belies its relaxed style."
—Nick Gazzard, FCILT (Fellow of the Chartered Institute of Logistics and Transport UK), CEO, Incept

"Demand-Driven Inventory Optimization and Replenishment is a long-overdue practical book on inventory optimization written by one of the industry's top inventory management practitioners. Through his real-life experiences and stories, Bob does a remarkable job of taking a highly technical supply chain discipline and making it easy to understand through his practical real-life experiences and stories."
—From the Foreword by Charles W. Chase Jr., Chief Industry Consultant, Manufacturing & Supply Chain Global Practice, SAS Institute Inc.

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Product Details

  • ISBN-13: 9781118584569
  • Publisher: Wiley
  • Publication date: 9/23/2013
  • Series: Wiley and SAS Business Series
  • Edition number: 1
  • Pages: 256
  • Product dimensions: 6.30 (w) x 9.10 (h) x 0.90 (d)

Meet the Author

ROBERT A. DAVIS is a Principal Product Manager in the Supply Chain Management Solutions group at SAS Institute. Prior to joining SAS, Davis worked for over twenty years with Nestlé and ConAgra in their Grocery Products Divisions. During that time, he helped develop best practices in account management, trade spending analysis, and replenishment planning. He has been recognized with national awards for excellence in sales and business management. At SAS, he has helped develop expertise in supply chain cost analysis in the fast-moving consumer products industry, inventory optimization, service parts optimization, and sales and operations planning. He is a recognized global expert in multi-echelon inventory and replenishment optimization.

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Table of Contents

Foreword xiii

Preface xvii

Acknowledgments xix

Chapter 1 Creating Demand-Driven Supply 1

The Path to Demand-Driven Supply 3

Shifting from Supply-Driven to Demand-Driven Methodologies 4

Moving to a Demand-Driven Supply 9

Creating My Island of Efficiency 11

What Is an Island of Efficiency? 13

Notes 16

Chapter 2 Achieving Timely and Accurate Responses to Customer Demand 17

Push and Pull Supply Chains 18

Enter Toyota and the Kanban System 20

From Kanban to Just-in-Time Production 22

What Is Needed for a JIT System to Work Efficiently? 23

A Broader View of JIT/Kanban in Action 25

The Known Demand Becomes the Predictable Demand 26

The JIT Production Supply Chain Weaknesses Become Amplified in the Distribution Chain 29

Some Distribution Issues 29

The Customer Pushes Back 30

The Squeeze Is On 31

Creating an Efficient Supply Chain Using JIT Functionality 32

Push-Pull Tipping Points 34

In Search of True Demand 35

Notes 38

Chapter 3 Just-in-Time and Enterprise Resource Planning Rise Together 39

Denormalized Tables 40

Sequential Optimization 43

Upstream Service Levels 44

Accumulated Demand Variance 46

Multiple Hierarchies of Service Level Requirements 47

The Effects of ERP Shortcomings 48

Shifting Costs on a Balance Sheet 49

Moving the Focus Away from Inventory to Replenishment 50

The Long Tail 53

Making Mistakes Faster 57

Working with One Hand Tied behind Your Back 58

So, Here We Are 60

Notes 61

Chapter 4 How Does Days of Supply Wreak Havoc on the Supply Chain? 63

Rule-of-Thumb Days/Weeks of Supply Exposed 64

Inefficiencies of Rule-of-Thumb Days of Supply 68

Turning Days of Supply on Its Head 74

Creating the Efficiency Envelope 77

The Journey, So Far 80

Notes 82

Chapter 5 What Will You Accomplish with Inventory Optimization? 83

How Does Inventory Optimization Improve the ERP Systems? 84

Development of the Inventory Policies and Replenishment Plans 85

The Network Structure 85

The Service Level 86

The Lead Time and Lead-Time Variance 87

Ordering Rules 88

Demand 89

Developing Policy Outputs 90

Chapter 6 Fitting Unlimited Optimization into a Constraining World 105

The Present State of Affairs in Replenishment Planning 106

How Alerts Take on More Significance When Customer Service Is Paramount 107

Time 108

Space 109

The Comingling of Demand 110

The Short Supply or Allocated Product 112

Where Does “Optimized” Replenishment Need to Go in Order to Encompass the Entire Distribution Chain? 114

The Upstream Reaction 115

Moving Upstream Reactions into Real Replenishment 119

Replenishment as a Means to Inventory Optimization Harmony 123

Chapter 7 Reviewing the Three Proof of Value Engagements 125

Proving That Inventory Optimization Is a Good Business Rationale 126

The Good: When Proof of Value Engagements Work 127

The Bad: When Proof of Value Engagements Don’t Work 133

The Best: A Complete Proof of Value Engagement 139

Looking Back 155

Chapter 8 Inventory Optimization in the Real World: Matas A/S 157

Matas A/S: Automated Forecasting and Replenishment 159

What Were the Problems at Matas? 160

DC Replenishment 161

Store Replenishment 162

A Project in Inventory Optimization 163

A Pilot Program versus a Proof of Value Process 167

Rolling the Project Out to the Enterprise 169

The Matas Network 171

A Closer Look at the Optimization Process 172

The Ultimate Matas Goal 177

The Matas Results 178

Reflections on the Project 180

Chapter 9 A Consultant’s View of Inventory Optimization 181

Who Is Anders Richter? 182

In Closing 199

Note 200

Chapter 10 Pulling It All Together 201

Aligning the Inventory Optimization Goals to Correct Deep-Seated Business Actions in a Company 204

Inventory Optimization Can’t Do What Was Done Before 204

How to Change the Playing Field 205

Overarching Business Issues Impede Positive Inventory Control 206

Supply Chain Inventory Strategies Benchmark Report Recommendations 210

In Closing 213

Notes 214

Epilogue 215

About the Author 219

Index 221

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